Novartis (NVS) Stock Down on Profit Warning

Novartis (NVS) stock is lower in pre-market trading on Tuesday after cautioning that full-year profit could slide on more investments in its heart-failure drug.
By Rachel Graf ,

NEW YORK (TheStreet) -- Shares of Novartis (NVS) - Get Report are declining 1.10% to $81.14 in pre-market trading after the Swiss drugmaker warned that full-year profit could fall as it boosts investment in its new heart-failure treatment amid generic competition for its bestseller cancer treatment Gleevec. 

The decision to bolster the company's investment in Entresto by another $200 million this year could cause core operating income to decline by a percentage in the low single digits at constant exchange rates, according to a company statement. 

The investment will be put toward hiring sales representatives to educate physicians about new treatment guidelines that support the use of Entresto for heart failure, Bloomberg reports.

Novartis had previously expected core operating income to be largely unchanged from last year. The company maintained its revenue guidance, and still expects sales to be in line with 2015. 

For the second quarter, core net income dropped 5% year-over-year to $2.9 billion and revenue fell 2% to $12.5 billion. The results beat analysts' estimates of $2.8 billion and $12.3 billion respectively, according to the Wall Street Journal. 

Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B-.

Novartis' strengths such as its reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

You can view the full analysis from the report here: NVS

TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author. 

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